By Zack Colman - 07/17/12 03:19 PM EDT
An influential electric power trade group is rallying its members to oppose an Energy Department (DOE) plan that it says would raise costs on rural hydroelectric power customers without their consent.
The memo from Energy Secretary Steven Chu calls on the nation’s four government-operated power marketing administrations (PMAs) — which are federally created electric power utilities — to upgrade transmission infrastructure to include more communications and control technologies.
That would affect thousands of customers, as PMA transmission lines overlap the transmission grid in more than 40 percent of the continental United States.
The plan would let DOE order investments in each of the four PMAs to “serve as test beds” for cybersecurity technologies, the memo said.
The administration’s plan is only at its starting point for now.
The Western Area Power Administration (WAPA), one of the nation’s four PMAs, is hosting a series of six informational meetings on the order beginning Tuesday in Rapid City, S.D. DOE is working “in close collaboration” with all four PMAs to gather stakeholder input, the department said.
A spokesman for NRECA criticized the memo for being more about moving forward on the administration’s energy policy goals more than providing low-cost power to rural customers.
“I think what we’re talking about is the Department of Energy asking the PMAs to change the way that they do business in order to support economic policies that are formatted in Washington,” Patrick Lavigne, a spokesman with NRECA, told The Hill. “It’s not about providing electricity at the lowest cost to consumers. It’s about prioritizing government subsidies to participants in the energy field.”
Energy Department officials said the new investments are needed to modernize a “dramatically” changing electric grid.
“In the coming years, the PMAs will need to make many of the same types of investments that other privately held electric utilities will need to make, and in some cases are already making, if the United States is to remain economically competitive,” DOE said. “As with other electric utilities, these investments will be paid for by those who use those investments.”
The department acknowledged that the changes will be difficult. The memo states that “the current economic environment is creating pressure on many of the PMAs’ customers. Capital improvements, therefore, must be staged to ensure the costs are appropriately managed.”
To that end, the memo encouraged PMAs to “capture economies” by working with other users of power grids to share costs.
Whether there is political will from DOE to seriously push forward with the plan remains unanswered.
A bicameral, bipartisan group of 166 lawmakers sent a letter to Chu in June expressing concern with the plan. Sens. Lisa Murkowski (R-Alaska) and Ron Wyden (D-Ore.), the top Republican and second ranking Democrat on the Senate Committee on Energy and Natural Resources, both signed the letter.
“Given the unprecedented congressional reaction to the memo, Sen. Murkowski would hope that DOE would take a step back, press pause on the implementation of the initiatives, and reach out to Congress and PMA customers in a constructive way,” said Robert Dillon, Republican spokesman for the panel.
Dillon also warned Energy could face a lawsuit if it pushes forward with the requirements, as he said the agency could lack the administrative authority to proceed with actions outlined in the memo.
“If DOE does not change course, it likely could face legal action,” Dillon said, explaining that the memo appears “dismissive” of the statutes governing PMAs and that DOE has not conducted a legal analysis for the plan.
The federal government created the four PMAs to use extra power from federal water projects, namely dams that were largely meant for irrigation and flood control, to recoup the costs of those projects. It decided to sell the excess hydropower in underserved rural areas, creating Bonneville Power Administration in 1937.
Energy argues the memo’s recommended steps fall within its power.
“Over time, the legal responsibilities of the entities that operate the transmission grid have changed, including the PMAs,” DOE staff said. “The areas of focus outlined in the Secretary’s memo are within the PMAs’ existing statutory authorities and did not institute any changes to the authority or structure of the PMAs.”
NRECA acknowledged there is no firm contract for rates between the power marketing administration and its customers.
Instead, the relationship revolves around a “historical construct” known as beneficiary pay, which is when one party agrees to pay above-market rates because it gets most of the benefit from a service provider. The understanding is that those customers will continue to be the main beneficiary of that service, and that the above-market rates will help pay for capital improvements.
NRECA thinks Energy’s plan might disrupt that arrangement by extending service to “far-flung regions,” Lavigne said. But he also acknowledged a “historical construct” is not the same as a contract.
The worry that the plan might spread service to a larger customer base is understandable, but might be overblown, Wilkerson said.
“I think it’s a slippery slope mentality,” he said. “I think it’s a fear, and I honestly can’t tell you how realistic or legitimate that fear is.”